All bets are off in the race for financial services AUM in about five weeks, when hedge funds and private equity companies formally gain the right to market directly to potential clients.
That’s when the provisions of the JOBS Act that lift the ban on hedge fund and private equity advertising become effective. These rules were formally approved about a month ago by the federal Securities and Exchange Commission.
There’s been a lot of speculation about exactly what hedge funds and private equity companies will do when they can advertise and market, which could be anything and everything including:
It’s all likely, but what hasn’t been discussed as much is the impact of the entrance of extremely well funded entities who are set up to compete with financial advisors, financial services companies and asset managers for a limited pool of high net worth, ultra high net worth and institutional assets. There’s a limited pool of these assets, and competition is already fierce among companies that have the right to directly market and advertise today.
Imagine what it’s going to be like in a few years when extremely well funded hedge funds really get their arms around what they can do and hire the brightest and the best Mad Men to formulate and execute a marketing strategy for them. While all healthy financial services firms have money to burn to a degree, hedge funds charge fees far in excess of what other asset managers can charge and they also have the ability to lock up AUM so that it can’t flow out in the same way that it does with mutual funds and financial advisors.
If you are currently seeking to gather AUM, you better watch out. These guys are coming and they have the ability to suck all the air out of the room so that there is even less space for other messages. In an already noisy atmosphere, it will be even harder for potential clients to distinguish your message from all the others out there.